Bonds are fixed-income instruments that traditionally pay out a fixed interest rate, though variable interest rates are also now common. Bonds represent a loan made by an investor to a borrower and are typically used by companies, municipalities, states, and governments to finance projects or even finance their operations.
If you are the bond owner, you are the debtholder (creditor) of the issuer of the bond.
It’s important to note that bond prices are inversely correlated with interest rates: When rates go up, bond prices fall. When interest rates go down, bond prices increase.
Although considered a more secure type of investment than the stock market, there is a risk since companies can default on your bonds, and bond yields can fall.
Just like every investment strategy, a knowledgeable and trustworthy Financial Advisor like Jon Franco can help you navigate the bonds market. Bonds can be an important baseline component of your overall retirement plan. Gains can be made if you resell the bond at a higher price than purchased, and you can receive income through the interest payments; this can be a sound component of any retirement plan.